Whose Oil Is It, Anyway?

Illustration: Jacob Magraw-Mickelson

TODAY more than three-quarters of the world’s oil is owned and controlled by governments. It wasn’t always this way.

Until about 35 years ago, the world’s oil was largely in the hands of seven corporations based in the United States and Europe. Those seven have since merged into four: ExxonMobil, Chevron, Shell and BP. They are among the world’s largest and most powerful financial empires. But ever since they lost their exclusive control of the oil to the governments, the companies have been trying to get it back.

Iraq’s oil reserves — thought to be the second largest in the world — have always been high on the corporate wish list. In 1998, Kenneth Derr, then chief executive of Chevron, told a San Francisco audience, “Iraq possesses huge reserves of oil and gas — reserves I’d love Chevron to have access to.”

A new oil law set to go before the Iraqi Parliament this month would, if passed, go a long way toward helping the oil companies achieve their goal. The Iraq hydrocarbon law would take the majority of Iraq’s oil out of the exclusive hands of the Iraqi government and open it to international oil companies for a generation or more.

In March 2001, the National Energy Policy Development Group (better known as Vice President Dick Cheney’s energy task force), which included executives of America’s largest energy companies, recommended that the United States government support initiatives by Middle Eastern countries “to open up areas of their energy sectors to foreign investment.” One invasion and a great deal of political engineering by the Bush administration later, this is exactly what the proposed Iraq oil law would achieve. It does so to the benefit of the companies, but to the great detriment of Iraq’s economy, democracy and sovereignty.

Since the invasion of Iraq, the Bush administration has been aggressive in shepherding the oil law toward passage. It is one of the president’s benchmarks for the government of Prime Minister Nuri Kamal al-Maliki, a fact that Mr. Bush, Secretary of State Condoleezza Rice, Gen. William Casey, Ambassador Zalmay Khalilzad and other administration officials are publicly emphasizing with increasing urgency.

The administration has highlighted the law’s revenue sharing plan, under which the central government would distribute oil revenues throughout the nation on a per capita basis. But the benefits of this excellent proposal are radically undercut by the law’s many other provisions — these allow much (if not most) of Iraq’s oil revenues to flow out of the country and into the pockets of international oil companies.

The law would transform Iraq’s oil industry from a nationalized model closed to American oil companies except for limited (although highly lucrative) marketing contracts, into a commercial industry, all-but-privatized, that is fully open to all international oil companies.

The Iraq National Oil Company would have exclusive control of just 17 of Iraq’s 80 known oil fields, leaving two-thirds of known — and all of its as yet undiscovered — fields open to foreign control.

The foreign companies would not have to invest their earnings in the Iraqi economy, partner with Iraqi companies, hire Iraqi workers or share new technologies. They could even ride out Iraq’s current “instability” by signing contracts now, while the Iraqi government is at its weakest, and then wait at least two years before even setting foot in the country. The vast majority of Iraq’s oil would then be left underground for at least two years rather than being used for the country’s economic development.

The international oil companies could also be offered some of the most corporate-friendly contracts in the world, including what are called production sharing agreements. These agreements are the oil industry’s preferred model, but are roundly rejected by all the top oil producing countries in the Middle East because they grant long-term contracts (20 to 35 years in the case of Iraq’s draft law) and greater control, ownership and profits to the companies than other models. In fact, they are used for only approximately 12 percent of the world’s oil.

Iraq’s neighbors Iran, Kuwait and Saudi Arabia maintain nationalized oil systems and have outlawed foreign control over oil development. They all hire international oil companies as contractors to provide specific services as needed, for a limited duration, and without giving the foreign company any direct interest in the oil produced.

Iraqis may very well choose to use the expertise and experience of international oil companies. They are most likely to do so in a manner that best serves their own needs if they are freed from the tremendous external pressure being exercised by the Bush administration, the oil corporations — and the presence of 140,000 members of the American military.

Iraq’s five trade union federations, representing hundreds of thousands of workers, released a statement opposing the law and rejecting “the handing of control over oil to foreign companies, which would undermine the sovereignty of the state and the dignity of the Iraqi people.” They ask for more time, less pressure and a chance at the democracy they have been promised.

Responses to Antonia’s Op-Ed

Three Letters to the Editor published in the New York Times on March 19 and March 21, 2007.

War, Benchmarks and Iraq’s Oil (2 Letters)

To the Editor:

I didn’t think that the Bush administration was capable of appalling me any more than it already has, but Whose Oil Is It, Anyway? by Antonia Juhasz (Op-Ed, March 13), proved me wrong.

So one of our vital benchmarks for Iraqi progress, a measure by which we determine when to bring home our brave service members, is to allow multinational oil companies to take control of Iraqi oil, thus increasing their already burgeoning profits while reducing the amount of oil revenues available for Iraqi national reinvestment?

Remember those antiwar protesters and their signs that read No Blood for Oil? Remember how they were derided as anti-American and antimilitary? It appears that those protesters spoke the truth.

This is just another example of Big Oil’s dominance of American foreign and domestic policy, right alongside the administration’s refusal to take meaningful action to combat global climate change.

Dan Browning
Decatur, Ga., March 13, 2007


To the Editor:

I was mortified to read Antonia Juhasz’s Op-Ed article about the proposed Iraqi oil law and to realize that the world’s suspicions about oil being the primary agenda of the Iraq invasion were correct.

Now that we have devastated Iraq and killed untold numbers of its citizens, the United States intends to magnify the impact of its malevolent presence by depriving the Iraqi people of the means to rebuild their shattered nation.

The oil law set to go before the Iraqi Parliament is radical, and the model has been rejected by other oil-producing nations of the Middle East precisely because of the unfair advantage it offers to multinational corporations.

President Bush has suggested that they hate us because we value freedom. I might suggest that perhaps they hate us for robbing them blind.

Peter Coyote
Mill Valley, Calif., March 13, 2007


Bush’s Call for Patience on the War (1 letter)

To the Editor:

Viewing the Bush administration’s close link with oil companies and its closed-door meeting with company representatives before our attack on Iraq, one cannot help but wonder if there could be underlying reasons for President Bush’s warning not to “pack up and go home.”

It will be interesting to see how long the troops will remain in Iraq if a final agreement should be reached ensuring that our oil companies get control over the bulk of their oil.

Claude M. Gruener
Austin, Tex., March 20, 2007